Intrinsic value of Autoliv, Inc. - ALV

Previous Close

$70.39

  Intrinsic Value

$93.35

stock screener

  Rating & Target

buy

+33%

Previous close

$70.39

 
Intrinsic value

$93.35

 
Up/down potential

+33%

 
Rating

buy

We calculate the intrinsic value of ALV stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 6.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  8,852
  9,055
  9,288
  9,549
  9,839
  10,156
  10,502
  10,877
  11,280
  11,713
  12,176
  12,670
  13,196
  13,755
  14,349
  14,978
  15,643
  16,347
  17,091
  17,876
  18,705
  19,579
  20,500
  21,470
  22,492
  23,569
  24,701
  25,893
  27,147
  28,466
Variable operating expenses, $m
  7,910
  8,089
  8,293
  8,523
  8,777
  9,055
  9,359
  9,688
  10,042
  10,422
  10,686
  11,119
  11,581
  12,072
  12,593
  13,144
  13,729
  14,346
  14,999
  15,688
  16,415
  17,182
  17,991
  18,842
  19,739
  20,684
  21,678
  22,724
  23,825
  24,982
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  7,910
  8,089
  8,293
  8,523
  8,777
  9,055
  9,359
  9,688
  10,042
  10,422
  10,686
  11,119
  11,581
  12,072
  12,593
  13,144
  13,729
  14,346
  14,999
  15,688
  16,415
  17,182
  17,991
  18,842
  19,739
  20,684
  21,678
  22,724
  23,825
  24,982
Operating income, $m
  941
  966
  995
  1,026
  1,062
  1,101
  1,143
  1,189
  1,238
  1,291
  1,490
  1,551
  1,615
  1,684
  1,756
  1,833
  1,915
  2,001
  2,092
  2,188
  2,289
  2,396
  2,509
  2,628
  2,753
  2,885
  3,023
  3,169
  3,323
  3,484
EBITDA, $m
  1,393
  1,425
  1,462
  1,503
  1,549
  1,599
  1,653
  1,712
  1,775
  1,844
  1,916
  1,994
  2,077
  2,165
  2,258
  2,357
  2,462
  2,573
  2,690
  2,814
  2,944
  3,082
  3,227
  3,379
  3,540
  3,710
  3,888
  4,076
  4,273
  4,481
Interest expense (income), $m
  64
  120
  126
  132
  139
  147
  155
  165
  175
  187
  199
  212
  226
  241
  257
  273
  291
  310
  330
  351
  374
  398
  422
  449
  477
  506
  537
  569
  603
  639
  677
Earnings before tax, $m
  821
  840
  863
  888
  915
  945
  978
  1,014
  1,052
  1,092
  1,278
  1,325
  1,374
  1,427
  1,483
  1,542
  1,604
  1,671
  1,740
  1,814
  1,892
  1,974
  2,060
  2,151
  2,247
  2,348
  2,454
  2,566
  2,684
  2,807
Tax expense, $m
  222
  227
  233
  240
  247
  255
  264
  274
  284
  295
  345
  358
  371
  385
  400
  416
  433
  451
  470
  490
  511
  533
  556
  581
  607
  634
  663
  693
  725
  758
Net income, $m
  599
  613
  630
  648
  668
  690
  714
  740
  768
  797
  933
  967
  1,003
  1,042
  1,082
  1,126
  1,171
  1,220
  1,271
  1,324
  1,381
  1,441
  1,504
  1,571
  1,640
  1,714
  1,792
  1,873
  1,959
  2,049

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  6,856
  7,014
  7,194
  7,397
  7,621
  7,867
  8,135
  8,425
  8,737
  9,073
  9,431
  9,814
  10,222
  10,655
  11,115
  11,602
  12,117
  12,662
  13,239
  13,847
  14,489
  15,165
  15,879
  16,631
  17,422
  18,256
  19,133
  20,057
  21,028
  22,050
Adjusted assets (=assets-cash), $m
  6,856
  7,014
  7,194
  7,397
  7,621
  7,867
  8,135
  8,425
  8,737
  9,073
  9,431
  9,814
  10,222
  10,655
  11,115
  11,602
  12,117
  12,662
  13,239
  13,847
  14,489
  15,165
  15,879
  16,631
  17,422
  18,256
  19,133
  20,057
  21,028
  22,050
Revenue / Adjusted assets
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
  1.291
Average production assets, $m
  2,416
  2,472
  2,536
  2,607
  2,686
  2,773
  2,867
  2,969
  3,079
  3,198
  3,324
  3,459
  3,603
  3,755
  3,917
  4,089
  4,271
  4,463
  4,666
  4,880
  5,106
  5,345
  5,596
  5,861
  6,140
  6,434
  6,743
  7,069
  7,411
  7,771
Working capital, $m
  434
  444
  455
  468
  482
  498
  515
  533
  553
  574
  597
  621
  647
  674
  703
  734
  767
  801
  837
  876
  917
  959
  1,004
  1,052
  1,102
  1,155
  1,210
  1,269
  1,330
  1,395
Total debt, $m
  2,328
  2,442
  2,572
  2,717
  2,879
  3,056
  3,249
  3,458
  3,683
  3,924
  4,182
  4,458
  4,751
  5,063
  5,394
  5,745
  6,116
  6,509
  6,924
  7,361
  7,824
  8,311
  8,825
  9,366
  9,936
  10,536
  11,168
  11,833
  12,532
  13,268
Total liabilities, $m
  4,937
  5,050
  5,180
  5,326
  5,487
  5,664
  5,857
  6,066
  6,291
  6,532
  6,791
  7,066
  7,360
  7,672
  8,002
  8,353
  8,724
  9,117
  9,532
  9,970
  10,432
  10,919
  11,433
  11,974
  12,544
  13,144
  13,776
  14,441
  15,140
  15,876
Total equity, $m
  1,920
  1,964
  2,014
  2,071
  2,134
  2,203
  2,278
  2,359
  2,446
  2,540
  2,641
  2,748
  2,862
  2,983
  3,112
  3,248
  3,393
  3,545
  3,707
  3,877
  4,057
  4,246
  4,446
  4,657
  4,878
  5,112
  5,357
  5,616
  5,888
  6,174
Total liabilities and equity, $m
  6,857
  7,014
  7,194
  7,397
  7,621
  7,867
  8,135
  8,425
  8,737
  9,072
  9,432
  9,814
  10,222
  10,655
  11,114
  11,601
  12,117
  12,662
  13,239
  13,847
  14,489
  15,165
  15,879
  16,631
  17,422
  18,256
  19,133
  20,057
  21,028
  22,050
Debt-to-equity ratio
  1.210
  1.240
  1.280
  1.310
  1.350
  1.390
  1.430
  1.470
  1.510
  1.540
  1.580
  1.620
  1.660
  1.700
  1.730
  1.770
  1.800
  1.840
  1.870
  1.900
  1.930
  1.960
  1.980
  2.010
  2.040
  2.060
  2.080
  2.110
  2.130
  2.150
Adjusted equity ratio
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  599
  613
  630
  648
  668
  690
  714
  740
  768
  797
  933
  967
  1,003
  1,042
  1,082
  1,126
  1,171
  1,220
  1,271
  1,324
  1,381
  1,441
  1,504
  1,571
  1,640
  1,714
  1,792
  1,873
  1,959
  2,049
Depreciation, amort., depletion, $m
  452
  459
  467
  477
  487
  498
  510
  523
  537
  552
  426
  443
  462
  481
  502
  524
  548
  572
  598
  626
  655
  685
  717
  751
  787
  825
  865
  906
  950
  996
Funds from operations, $m
  1,051
  1,073
  1,097
  1,124
  1,155
  1,188
  1,224
  1,263
  1,305
  1,350
  1,359
  1,411
  1,465
  1,523
  1,585
  1,650
  1,719
  1,792
  1,869
  1,950
  2,036
  2,126
  2,222
  2,322
  2,428
  2,539
  2,656
  2,780
  2,909
  3,046
Change in working capital, $m
  9
  10
  11
  13
  14
  16
  17
  18
  20
  21
  23
  24
  26
  27
  29
  31
  33
  34
  36
  38
  41
  43
  45
  48
  50
  53
  56
  58
  61
  65
Cash from operations, $m
  1,043
  1,063
  1,086
  1,112
  1,141
  1,172
  1,207
  1,245
  1,285
  1,329
  1,337
  1,386
  1,439
  1,496
  1,556
  1,619
  1,686
  1,757
  1,832
  1,912
  1,995
  2,083
  2,176
  2,274
  2,378
  2,486
  2,601
  2,721
  2,848
  2,981
Maintenance CAPEX, $m
  -303
  -310
  -317
  -325
  -334
  -344
  -355
  -368
  -381
  -395
  -410
  -426
  -443
  -462
  -481
  -502
  -524
  -548
  -572
  -598
  -626
  -655
  -685
  -717
  -751
  -787
  -825
  -865
  -906
  -950
New CAPEX, $m
  -51
  -56
  -64
  -71
  -79
  -87
  -94
  -102
  -110
  -118
  -126
  -135
  -144
  -153
  -162
  -172
  -182
  -192
  -203
  -214
  -226
  -239
  -251
  -265
  -279
  -294
  -309
  -325
  -342
  -360
Cash from investing activities, $m
  -354
  -366
  -381
  -396
  -413
  -431
  -449
  -470
  -491
  -513
  -536
  -561
  -587
  -615
  -643
  -674
  -706
  -740
  -775
  -812
  -852
  -894
  -936
  -982
  -1,030
  -1,081
  -1,134
  -1,190
  -1,248
  -1,310
Free cash flow, $m
  688
  697
  705
  715
  727
  741
  757
  775
  794
  816
  800
  825
  852
  881
  912
  945
  980
  1,018
  1,057
  1,099
  1,143
  1,190
  1,240
  1,292
  1,347
  1,405
  1,467
  1,531
  1,599
  1,671
Issuance/(repayment) of debt, $m
  99
  114
  130
  146
  161
  177
  193
  209
  225
  241
  258
  276
  293
  312
  331
  351
  371
  393
  415
  438
  462
  487
  514
  541
  570
  600
  632
  665
  699
  736
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  99
  114
  130
  146
  161
  177
  193
  209
  225
  241
  258
  276
  293
  312
  331
  351
  371
  393
  415
  438
  462
  487
  514
  541
  570
  600
  632
  665
  699
  736
Total cash flow (excl. dividends), $m
  787
  811
  835
  861
  889
  918
  950
  984
  1,019
  1,057
  1,059
  1,101
  1,146
  1,193
  1,243
  1,296
  1,351
  1,410
  1,472
  1,537
  1,605
  1,678
  1,753
  1,833
  1,917
  2,006
  2,098
  2,196
  2,299
  2,407
Retained Cash Flow (-), $m
  -36
  -44
  -50
  -57
  -63
  -69
  -75
  -81
  -87
  -94
  -100
  -107
  -114
  -121
  -129
  -136
  -144
  -153
  -161
  -170
  -180
  -190
  -200
  -210
  -222
  -233
  -246
  -259
  -272
  -286
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  751
  767
  785
  804
  826
  849
  875
  902
  932
  963
  958
  994
  1,032
  1,072
  1,114
  1,159
  1,207
  1,257
  1,311
  1,367
  1,426
  1,488
  1,554
  1,623
  1,696
  1,772
  1,853
  1,937
  2,027
  2,120
Discount rate, %
  5.70
  5.99
  6.28
  6.60
  6.93
  7.27
  7.64
  8.02
  8.42
  8.84
  9.28
  9.75
  10.24
  10.75
  11.29
  11.85
  12.44
  13.06
  13.72
  14.40
  15.12
  15.88
  16.67
  17.51
  18.38
  19.30
  20.27
  21.28
  22.34
  23.46
PV of cash for distribution, $m
  710
  683
  653
  623
  591
  557
  523
  487
  450
  413
  361
  325
  291
  257
  224
  193
  164
  138
  114
  93
  74
  58
  45
  34
  25
  18
  13
  9
  6
  4
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Autoliv, Inc. is a supplier of automotive safety systems with a range of product offerings, including passive safety systems and active safety systems. The Company operates through two segments: Passive Safety and Electronics. The Passive safety products include modules and components for passenger and driver-side airbags, side-impact airbag protection systems, seatbelts, steering wheels, inflator technologies, whiplash protection systems and child seats, and components for such systems, as well as passive safety electronic products, such as restraint electronics and crash sensors. The Active safety products include camera-based vision systems, night driving assist, automotive radars, brake controls, positioning systems, electronic control units, and other active safety systems. As of December 31, 2016, including joint venture operations, the Company had approximately 78 production facilities in 25 countries, consisting of both component factories and assembly factories.

FINANCIAL RATIOS  of  Autoliv, Inc. (ALV)

Valuation Ratios
P/E Ratio 10.9
Price to Sales 0.6
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 7.2
Price to Free Cash Flow 17.2
Growth Rates
Sales Growth Rate 9.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 8.8%
Cap. Spend. - 3 Yr. Gr. Rate 5.6%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 36%
Total Debt to Equity 42%
Interest Coverage 14
Management Effectiveness
Return On Assets 7.8%
Ret/ On Assets - 3 Yr. Avg. 7.2%
Return On Total Capital 11.1%
Ret/ On T. Cap. - 3 Yr. Avg. 10%
Return On Equity 15.9%
Return On Equity - 3 Yr. Avg. 13.9%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 20.4%
Gross Margin - 3 Yr. Avg. 20%
EBITDA Margin 12.4%
EBITDA Margin - 3 Yr. Avg. 11.7%
Operating Margin 8.4%
Oper. Margin - 3 Yr. Avg. 8.1%
Pre-Tax Margin 8%
Pre-Tax Margin - 3 Yr. Avg. 7.5%
Net Profit Margin 5.6%
Net Profit Margin - 3 Yr. Avg. 5.2%
Effective Tax Rate 30.1%
Eff/ Tax Rate - 3 Yr. Avg. 30.7%
Payout Ratio 35.8%

ALV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ALV stock intrinsic value calculation we used $8678 million for the last fiscal year's total revenue generated by Autoliv, Inc.. The default revenue input number comes from 0001 income statement of Autoliv, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ALV stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.7%, whose default value for ALV is calculated based on our internal credit rating of Autoliv, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Autoliv, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ALV stock the variable cost ratio is equal to 89.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ALV stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Autoliv, Inc..

Corporate tax rate of 27% is the nominal tax rate for Autoliv, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ALV stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ALV are equal to 27.3%.

Life of production assets of 7.8 years is the average useful life of capital assets used in Autoliv, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ALV is equal to 4.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1883.7 million for Autoliv, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 87.200 million for Autoliv, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Autoliv, Inc. at the current share price and the inputted number of shares is $6.1 billion.

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